(Bloomberg) -- UnitedHealth Group Inc. shares fell as health care costs continued to rise and revenue missed expectations in the fourth quarter.
Most read from Bloomberg
The stock fell 3% at the open in New York on Thursday, with other insurers including Elevance Health Inc. and Humana Inc. also falling.
UnitedHealth said Thursday its medical loss ratio, which shows the percentage of premiums paid for patient care, rose to 87.6% in the fourth quarter. By 2025, the cost ratio will be between 86% and 87%, compared with the average analyst estimate of 86%. Investors are more favorable to lower numbers.
Higher medical costs coupled with stricter government payment policies have weighed on U.S. health insurers' earnings for more than a year. UnitedHealth's results show these trends are not abating. The company confirmed the 2025 outlook it issued six weeks ago and said higher costs were reflected in its guidance.
RBC Capital Markets' Ben Hendrix said in a research note that health care costs in the fourth quarter were well above expectations for recent increases. He said investors were looking to ensure the company's cost outlook for 2025 was in line with targets.
According to Bloomberg:
UnitedHealth's commentary on utilization patterns and premium rates, including progress consistent with Medicaid acuity, will be a focus of our fourth-quarter earnings call to gauge whether the assumptions underlying the maintained 2025 forecast are too conservative. Premium revenue was 2.5% below market expectations despite lower medical costs, which was why fourth-quarter adjusted operating income missed expectations.
—Glen Losev, Business Intelligence Analyst. Read the research here.
UnitedHealth Group, which operates the largest U.S. health insurance company, was the first company in the industry to report fourth-quarter results and is seen as a leader in the industry. The company said specialty drugs and hospital billing practices drive up medical costs, factors it cited in October.
Still, the company's adjusted earnings topped Wall Street expectations in its first financial statement since a top executive was killed in New York last month. The company said it earned $6.81 per share in the quarter, compared with the $6.71 average estimate of analysts polled by Bloomberg. Revenue was $100.8 billion, slightly below expectations.
On December 4, a UnitedHealth executive was murdered outside an investor conference in New York, triggering a tragedy. This morning's earnings call was the first time company executives have spoken to the public since the incident. The shooting and online reaction to it have focused attention on industry practices such as denying claims and prior authorization and their profits, and heightened security concerns.
The Federal Trade Commission has been investigating drug benefit managers' handling of rebates, one of the price concessions middlemen negotiate with drugmakers on behalf of employers and other customers. UnitedHealth CEO Andrew Witty said the company's PBM unit returns 98% of rebates to customers. While some customers have chosen other models that allow UnitedHealth's PBMs to retain some discounts, he said those arrangements will end in 2028 and all of those discounts will be passed on to customers.
(Updated 2025 cost estimates in third paragraph, with rebate comments in last paragraph.)
Most read from Bloomberg Businessweek
©2025 Bloomberg